Recently, I have been spending a significant amount of time speaking with Wholesalers. Brokers, Carriers, and Third-Party Administrators, regarding the issues members of the Broker community are experiencing. Through all of these conversations, a consistent theme has appeared; the Small Group health insurance market is drastically underserved.
Small businesses are the backbone of the American job market.
The Small Business Association cites that 98.2 percent of US businesses are comprised of less than 100 employees, and a whopping 89 percent have fewer than 20 employees. Access to affordable, quality health insurance is a must for every business, no matter the size, in order to promote the health and wellbeing of employees, provide tax benefits, and enable better retention of top talent. And yet, despite the size and needs of this market segment, they are largely ignored by the Broker community. You probably know why?
It’s all about time, cost and money.
Small Group insurance is not a big revenue driver for Brokers. It takes the same amount of time and energy to enroll and service a group of 50 as it does a group of 500, but for only 10% of the commissions. In many cases, Brokers have told me that the time spent on Small Group actually outweighed any potential income. “I had to purge over 300 clients from my book of business about four years ago,” one Broker told me. “I just coudln’t give them the time and attention they deserved.” To add another layer of missed opportunity, Small Groups bring in leads from other categories that are an essential source of revenue for Brokers. The Commercial and P&C products that had been offered to these businesses and their employees are now more likely to be lost to the few Brokers who CAN service their health benefit needs. The result is a lose-lose scenario: Small Groups are left without the vital guidance of a trusted Broker, and Brokers are left unable to adequately capitalize on an important revenue stream.
A Case Study.
A recent client of Candor USA is a textbook example. The client, a large national Wholesaler, was writing health plans for over 80,000 members, at an average cost to enroll and service of $41 per policy per month. Commissions on these plans averaged $40 per policy per month. At a net loss $960,000 per year, the benefits side of the business acted as a loss-leader for the client’s other offerings. Despite the annual loss, the client knew that the ability to offer Health Insurance allowed them to fully service their existing book of business. Still, given the volume of loss, the client deemed the only way to continue to offer health benefits would be to find a way to streamline business and cut cost.
Enter Candor USA.
Candor USA is a software-as-a-service company that offers end-to-end Health Benefit automation for Wholesalers, MGAs, and their Broker partners. By automating the enrollment and servicing processes, Candor was able to cut the client’s cost by more than half. The result? A multi-million dollar net gain in Health Benefits, an increased ability to cross sell additional products (a reported $12M gain), and a very happy client. According to the VP of Employee Benefits, “We were able to more than triple our profits for 2019. The Candor team really pulled it out of the bag for us!”
The way forward.
The Small Group market represents a massive opportunity for you and your Broker partners. To take advantage of this market segment, you need a technology partner that enables Brokers to service their clients without breaking the bank, or consuming time and effort. If a Broker is provided with a digital platform that enables them to automate the end-to-end workflow from plan offering to selection to plan administration, support, and access to the widest range of plans at the lowest possible price and with the lowest cost of administration, the solution becomes clear. Candor USA supports the Broker Model with the total understanding that the Broker must maintain their brand, business and brokerage. With the understanding of the pressure on the Broker business model of direct to consumer/employer marketplace, they will never sell direct. Candor USA powers the technology.
About the author: Nick Shirman is the Director of Sales at Candor USA and leads the effort to support MGA and Wholesaler relationships.